Most of us at, at some point depend on the ability to borrow money from a variety of sources, in order to pay for the things that modern day life dictates we all should have.
This means that with more and more people struggling with personal debt, currently at an all time high in the UK at around £1.3 trillion, it is more important than ever to manage personal debt wisely.
One of the most important things that will allow people to do this successfully will be to fully understand what factors actually make up a crucial personal credit report.
Without a satisfactory credit rating it will be virtually impossible for someone to receive credit of any kind. Even worse that this if they are accepted for credit, in a strange quirk of lending strategy, they will be made to pay a significantly higher interest rate on any money they borrow.
There are however many common urban myths when it comes to what can or cannot influence your credit score in modern times. The following guide should help to clear up some of these and allow you to concentrate on what really matters to lenders.
Someone living at the same address as you could affect your credit rating.
Until recently this was still the case, however, changes in legislation means that this is now no longer happens.
Your credit report now only contains information for people that you are financially linked to, a joint bank account or mortgage for instance.
If you don’t want any association to cause you problems make sure that not only is the list of your associates correct but anyone on the list checks their rating before making any further applications.
Someone who has previously lived at your home address could harm your credit score.
This is one of the most common misconceptions associated with credit scoring and it is totally untrue.
Lenders are solely interested in your personal ability to meet payments on any credit you are given, whether you are a millionaire or pauper.
They will almost certainly need to know your addresses for the previous three years, if you have recently moved, but this is more to do with proving your past history than having anything to do with altering your credit score.
It is a good idea to make sure that you are included on the electoral register where ever you live as lenders do use this information to combat fraudulent claims.
The reason for your poor credit score is because you’ve been blacklisted.
Contrary to what many of us think a credit blacklist does not exist.
Lenders are not in the least bit interested in your religion, gender or who else lives on your street etc. they are purely interested in the way you have conducted your financial affairs over many years. This will allow them to create a prediction of how you are likely to perform in the future.
There is only one credit rating list.
Again this is not true. Depending on what you are applying for and your circumstances at the time you could have a variety of different scores.
Lenders all have slightly different ways of calculating your credit score. They do however have a common thread, keeping your payments up to date and paying off some of your loans is likely to improve your credit score while defaulting or missing payments is probably going to damage it.
Your rating is decided by a “Credit Reference Agency”
Most of us will have heard of “Equifax” or “Experion”. These are the two main credit reference agencies but what is not widely understood is that they simply gather and hold information about our credit history.
This will include details of loans, credit cards, mortgages etc that you have taken out and your payment history associated with these loans. It will also include any county court judgements or details of any bankruptcy.
It is actually the lenders who will decide your credit worthiness based on the information held by these agencies. They will use this information to compile a credit score for you and generally if you have a high score then you represent a low risk and will therefore find it easier to get credit.
With this in mind it is vitally important to check with the various credit reference agencies that the information held by them is up to date and correct as any incorrect information could adversely affect your credit score.
Any past debts I have had don’t count.
If only this were true! Any previous missed payments, defaulted loans etc may still have an effect on your current credit score.
A bankruptcy will stay on your record for at least six years, a CCJ also for six years while any missed payments whatsoever will still be seen for three years.
While this might seem harsh, especially if you are currently financially stable, there are certain circumstances where information held on your report can be amended by the addition of an explanation of the reasons for missed payments, after an accident or ill health etc.
Hopefully by understanding the truth behind what affects your personal credit report you will be in a better position to manage your finances responsibly and prevent any further problems in obtaining credit should the need arise in the future.
Call Now On
0800 043 4133
